Accounting for IGCSE & O level - Advanced Principles (Section 2 - No. 13)

Is a reduction in the trade receivables collection period good or bad for business?

Good: The collection period was previously too long and it improved credit control helps to reduce late payments and irrecoverable debts.

Bad: The collection period was previously too long and it improved credit control helps to reduce late payments and irrecoverable debts.

Good: The collection period was previously too short and it improved credit control helps to reduce late payments and irrecoverable debts.

Bad: The collection period was previously too short and it improved credit control helps to reduce late payments and irrecoverable debts.

A reduction is good. This means a business is collecting payments faster, improving cash flow and decreasing the likelihood of bad debts.